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Authored by Nicholas Colas via DataTrekResearch.com,

Impeachment was clearly the word of the day, so let’s talk about it.

It is freighted with anxious connotations for many Americans, who remember the tumultuous end of the Nixon administration in August 1974 and the national mood at the time. From a capital markets perspective, it was also a grim period. The S&P 500 fell 26% in 1974, tagging on to a 14% drop the prior year. That memory casts a long enough shadow that S&P futures dropped +10 handles yesterday afternoon after the Cohen/Manafort convictions on fears the US is doing a slow motion tumble into a political crisis.

That US stocks recovered yesterday is a good reminder that 2018 is not 1974. Recall that the country entered a deep recession in 1973 on the back of much higher oil prices (caused by a shooting war in the Middle East and Saudi embargo) and a weaker dollar (which ended a global system of fixed exchange rates). Now, we have 20% earnings growth in 2018, a good economy, low/stable interest rates and a rising dollar. From a macroeconomic standpoint, things are very different indeed.

Still, we have little doubt that a political event on the scale of a presidential impeachment would roil markets until the issue was resolved. Consumer confidence would likely take a hit as Americans engaged in a spirited national debate on the topic. Business investment might slow as managers took a wait-and-see approach to political developments. Whether this would cause a 5% pullback in US stocks or more is as unknowable as the exact timeline of how all this might unfold.

So how likely is such an event, or a permutation (President Trump resigns) thereof? From online prediction market PredictIt.Org, which allows users to place small wagers on political events, a few relevant data points:

• 90%: the current odds for “Will Trump be president at the end of 2018?”

• 67%: “Will Trump be president at the end of 2019?”

• 45%: “Will Trump be impeached in his first term?”

A few words about that last one:

• Impeachment doesn’t mean President Trump is out of a job. The House, which PredictIt users believe Democrats will control in 2019 (66% odds), could technically impeach the president but the Senate (76% odds Republicans hold) could still acquit him.

• That 45% is an all-time high, likely in response to yesterday’s news. At a few points during the day it was actually over 50%.

• While interesting, we take the PredictIt platform predictions with a grain of salt. Less that $7,000 of wagers pushed that mean impeachment trade over 50/50 and there are only $84,000 worth of bets outstanding.

On a related point, we found a Quinnipiac poll released on July 25 that asked respondents “If the Democratic party wins control of the House of Representatives in 2018, would you like to see them begin the process to impeach President Trump, or not?” The answers:

• 55% said “No”. This is greater than the 51% “No” responses at the start of 2018.

• Responses split along gender lines, with 65% of men saying “No” as compared to 46% of women.

• The youngest age cohort in the survey (18-34) is even on impeachment (48% “Yes”, 48% “No”) while every other age group skews “No” (56%).

• 65% of self-reported Democrats do want their party to start impeachment proceedings.

• Independent voters – the sort that swing elections – reply “No” (53%) more than “Yes” (42%).

Our takeaways from all this:

• Over the short term, markets will likely ignore political headlines in the same way they did yesterday. This isn’t 1974; there is plenty of positive corporate and economic news to buffer equity prices from small shocks.

• It will take a decisive outcome to the Mueller investigation to swing general US public opinion towards the “Impeach” camp. As controversial as President Trump may be in some circles, and even after all the headlines of his time in office thus far, more than half of Americans do not want their representatives to impeach him.

• In the end, we don’t worry much about this issue from an investment perspective regardless of what happens in Washington DC over the coming months. Aside from a panicky drop on nasty sounding headlines (which we will tell you to buy), all this will run its course. Anticipated corporate earnings and interest rates drive stock prices, and nothing else.

• For those clients who disagree with our take, we have one word: Treasuries. These should rally if a political crisis takes deep roots and hobbles consumer and business sentiment.

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Just after midnight on Thursday EDT, the United States and China escalated their acrimonious trade war implementing punitive 25% tariffs on $16 billion worth of each other’s goods, even as mid-level officials from both sides resumed talks in Washington.

China’s Commerce Ministry said Washington was “remaining obstinate” by implementing the latest tariffs, which kicked-in on both sides as scheduled at 12:01 p.m. in Beijing (0401 GMT). “China resolutely opposes this, and will continue to take necessary countermeasures,” it said in a brief statement on its website, adding that Beijing will file a complaint over the latest tariffs with the World Trade Organisation (WTO).

The U.S. will collect an additional 25 percent in duties on Chinese imports ranging from motorcycles to steam turbines and railway cars; the Chinese retaliation will see a similarly sized tax on items including coal, medical instruments, waste products, cars and buses, Bloomberg reports.

Washington’s latest tariffs apply to 279 product categories including semiconductors, plastics, chemicals and railway equipment that the Office of the U.S. Trade Representative has said benefit from Beijing’s “Made in China 2025” industrial plan to make China competitive in high-tech industries.

China’s list of 333 U.S. product categories hit with duties includes coal, copper scrap, fuel, steel products, buses and medical equipment.

The world’s two largest economies have now slapped tit-for-tat tariffs on a combined $100 billion of products since early July, with more in the pipeline, adding to risks to global economic growth and underscoring the Fed’s concerns that trade war could adversely impact US and global growth and slowdown the Fed’s tightening cycle.

According to economist estimates, every $100 billion of imports hit by tariffs would reduce global trade by around 0.5%. And, as Reuters notes, they assume a direct impact on China’s economic growth in 2018 of 0.1-0.3 percentage points, and somewhat less for the United States, but the impact will be bigger next year, along with collateral damage for other countries and companies tied into China’s global supply chains.

Recently, president Donald Trump threatened to put duties on almost all of the more than $500 billion of Chinese goods exported to the United States annually unless Beijing agrees to sweeping changes to its intellectual property practices, industrial subsidy programs and tariff structures, and buys more U.S. goods. That figure is far more than China imports from the United States, raising concerns that Beijing could consider other forms of retaliation, such as making life more difficult for American firms in China such as Apple, or allowing its yuan currency to weaken further to support its exporters.

While Trump administration officials have been divided over how hard to press Beijing, the White House appears to believe it is winning the trade war – citing the record highs in the US stock market and the resurgent US economy (which is still enjoying the $1.5 trillion fiscal stimulus sugar highs) as China’s economy slows and its stock markets tumble.

“They’re not going to give that up easily. Naturally they’ll retaliate a little bit,” U.S. Commerce Secretary Wilbur Ross said on CNBC on Wednesday. “But at the end of the day, we have many more bullets than they do. They know it. We have a much stronger economy than they have, they know that too,” Ross said.

Ross encapsulated the administration’s thinking, adding that “if the market were worried about trade, it wouldn’t be at a record.”

He is right, and in fact the higher the market rises, the more emboldened Trump feels to keep layering on new and greater tariffs.

“Here we are three months later and if anything during that time the hawk’s position has been consolidated because we drove over the cliff and discovered our car can fly with the U.S. economy still doing fairly well and President Trump still popular among Republicans,” said Scott Kennedy, an expert on U.S.-China relations at the Center for Strategic and International Studies in Washington, cited by Bloomberg.

* * *

The latest tariffs kicked in amid two days of talks in Washington between mid-level officials from both sides, the first formal negotiations since U.S. Commerce Secretary met with Chinese economic adviser Liu He in Beijing in June. While business groups have expressed hope that the meeting would mark the start of serious negotiations over Chinese trade and economic policy changes demanded by Trump, Trump on Monday told Reuters in an interview that he did not “anticipate much” from the talks led by Treasury Under Secretary David Malpass and Chinese Commerce Vice Minister Wang Shouwen.

China’s official Xinhua news agency said in a commentary on Thursday that China approached the latest round of talks in good faith, but that Washington remains vague about what it wants.

“As U.S. President Donald Trump said in his book on making deals, ‘the point is that you can’t be too greedy.’ The two sides would hence be advisable to define their top concerns in this round of talks and outline a roadmap, in a bid to find a way out of the current impasse and toward the final settlement of the issues.”

As Bloomberg reports, the Chinese state-run tabloid Global Times said in an editorial late Wednesday that the Chinese delegation shouldn’t feel too much pressure over the outcome of talks. “To be honest, the Chinese society has no expectation that China and the U.S. can quickly reach a deal to end the trade war,” it said, adding that China was ready to endure the fallout from protracted trade tensions.

Yet while China has so far been far more hurt by the escalating trade war, if only based on its stock market which recently slumped into a bear market, even as the S&P500 has continued to soar, tariffs are beginning to increase costs for consumers and businesses on both sides of the Pacific, forcing companies to adjust their supply chains and pricing, with some U.S. firms looking to decrease their reliance on China.

One executive at a major U.S. manufacturer in China told Reuters the uncertainty about the duration of the trade conflict was more damaging than the tariffs themselves because it made business planning difficult. If the tariffs are in place for a long while, there will come a point at which the company would begin moving some sourcing and production out of China, a process that would be irreversible for several years once set in motion, the executive said, declining to be identified due to the sensitivity of the matter.

Others are just as vocal in their complaints.

According to Bloomberg, hundreds of executives and officials from U.S. companies, trade groups and other entities have descended on Washington this week to criticize the administration’s planned tariffs on the additional $200 billion in Chinese imports. Most have been asking for goods to be removed from the list of products

The administration has said it wants to avoid consumer products and target industries critical to China’s economic future. Yet companies including Fitbit Inc. and iRobot Corp. are complaining that their bicycles, handbags, sports equipment and a swath of additional products across multiple industries are being unfairly targeted.

“We question the logic that short-term pain will lead to long-term benefits,” Naomi Wilson, director of global policy, China & Greater Asia for the Information Technology Industry Council, testified Tuesday. The group represents companies including Amazon, Apple and Facebook.

However, as long as the market keeps rising even as trade war keeps escalating, any hopes that Trump will alter his trade policy can be put on ice.

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The rand has roundtripped – erasing overnight losses triggered by a Trump tweet – as South African authorities strike back at comments by the US President with regard the confiscation of white farmers’ land, and the rising violence against them.

As we noted last night, President Trump tweeted that he’s asked Secretary of State Mike Pompeo to look into “land farm seizures” and the “large scale killing of farmers” in South Africa after Fox News host Tucker Carlson aired a segment on the topic.

I have asked Secretary of State @SecPompeo to closely study the South Africa land and farm seizures and expropriations and the large scale killing of farmers. “South African Government is now seizing land from white farmers.” @TuckerCarlson @FoxNews

— Donald J. Trump (@realDonaldTrump) August 23, 2018

Trump’s tweet referenced a segment titled “Inside South Africa’s racist land seizures.” He quoted Carlson as saying the country is “now seizing land from white farmers.” The Fox News host was critical of South African President Cyril Ramaphosa.

But, as The Hill reports, the South African government issued a series of tweets pushing back against Trump’s comments, suggesting he was trying to stoke divisions in a country that continues to deal with the aftermath of apartheid.

“South Africa totally rejects this narrow perception which only seeks to divide our nation and reminds us of our colonial past,” the government tweeted.

“South Africa will speed up the pace of land reform in a careful and inclusive manner that does not divide our nation,” the government added in a subsequent tweet.

Both tweets tagged Trump.

South Africa totally rejects this narrow perception which only seeks to divide our nation and reminds us of our colonial past. #landexpropriation @realDonaldTrump @PresidencyZA

— South African Government (@GovernmentZA) August 23, 2018

South Africa will speed up the pace of land reform in a careful and inclusive manner that does not divide our nation. #landexpropriation @realDonaldTrump @PresidencyZA

— South African Government (@GovernmentZA) August 23, 2018

And this has prompted traders to reverse the losses – seemingly shrugging off any fears of sanctions from Trump over the government’s actions.

However,  no matter what spin Ramaphosa and his cronies attempt to put in this (remember the vehement denials with regard Trump’s comments about Sweden), white farmers are fleeing the country amid worries for their lives.

Rights groups said the initiative incites violence – there were 74 farm murders and 638 attacks, primarily against white farmers, in 2016-17 in South Africa – and while the government doesn’t dispute the figures, officials say farmers are victims of crime like just other citizens of the country gripped by violence and that they are not targeted because they are white.

Adi Schlebusch,  whose grandfather was murdered at his farm, confirmed to RT that roughly 15,000 Boers are ready to leave their country and begin a new life in Russia.

“The reason I’m considering immigration is honestly because I see dark clouds hanging over our future. The reality is that we do fear for our lives. And the reality is that a white farmer is attacked every day in South Africa. My grandfather was murdered on this farm. The government is certainly responsible for creating that climate of antagonism towards white farmers.”

The farmer said he visited Russia with his family to explore the possibilities of resettling in the area. “I know the growth of agricultural production is immense in Russia. So, I think it’s the right time to buy in into agriculture in Russia. And I think there’s a lot of potential.”

So far, Russia and Australia are offering asylum for white South African farmers. Will Trump follow?

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Credit Suisse fired two male employees in London after uncovering new evidence during an investigation into a sexual assault, the FT reports, citing a person familiar with the internal review which was completed last week. According to the report, the bank – which yesterday froze $5 billion in Russian assets – has terminated the contract of the senior banker at the center of the 2010 incident, as well as a second manager who was found to have hampered the original probe. The bank said it was not naming either man to protect the identity of the victim.

According to the report, the assault took place eight years ago when a group of staff went to a bar near Credit Suisse’s London office, “where the female banker was kissed and inappropriately touched by her senior colleague.” She reported the assault to the police at the time but no action was taken on the grounds of insufficient evidence.

While the female victim eventually left the company, she said she was inspired by the #MeToo movement in January to send two letters to current chief executive Tidjane Thiam, urging him to look again at the case.

While the letters initially slipped through the cracks, Mr Thiam apologised to the woman and ordered a new investigation into the assault after the Financial Times alerted him to their existence in March.

Lara Warner, the bank’s chief compliance and regulatory officer, and her chief of staff reviewed the evidence and interviewed those involved again and determined the two men had misled investigations and withheld vital information. The bank is not naming either man to protect the identity of the victim.

Since nearly a decade had passed before appropriate action was taken, Credit Suisse has made changes to its anti-harassment policies: going forward, conduct and ethics ombudswoman Antoinette Poschung will lead all investigations into allegations of sexual assault and will escalate serious complaints directly to the executive board. The bank is also performing a global review of training practices.

To remedy its lack of action, Credit Suisse plans to make a “substantial” donation to a women’s charity after consulting with the victim.

Commenting on the assault, the FT said the event is “symptomatic of a pattern of behaviour by some financiers, which many women see as a significant cause of the gender imbalance in the senior ranks of the industry.”

In a November survey of FT readers, almost 200 individuals — many of them working in finance — told of their experiences of sexual misconduct in the workplace. These ranged from cat calls as women walked across the trading floor to allegations of rape and other serious sexual assault.

There is evidence things are changing, with more women complaining about inappropriate behaviour by senior male colleagues. The FT cites the case of a former UBS employee has asked UK police to investigate an alleged sexual assault by a more senior colleague after deciding the bank had failed in its attempts to deal fairly with her case, the FT reported on Monday.

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After tumbling last night as headlines hit that the SEC rejected another nine Bitcoin ETF applications, cryptocurrencies have stabilized (for now). Additionally, a broad crackdown on crypto in China has not triggered wholesale selling.

Still it is an ugly week again for crytos broadly – though once again Bitcoin is outperforming as investors revert to the dominant player…

China is poised to block more than 120 foreign cryptocurrency exchanges as part of the government’s broader crackdown on activities related to digital money, according to state media. As SCMP reports, authorities will block access in China to 124 websites operated by offshore cryptocurrency exchanges that provide trading services to citizens on the mainland, the Shanghai Securities News, a newspaper affiliated with the country’s financial and markets regulators, reported on Thursday.

It said authorities will also continue to monitor and shut down domestic websites related to cryptocurrency trades and initial coin offerings (ICOs), and ban payment services from accepting cryptocurrencies, including bitcoin. The newspaper cited people close to the Leading Group of Internet Financial Risks Remediation, which was set up by China’s cabinet in 2016 and headed by Pan Gongsheng, a deputy governor of the People’s Bank of China – the country’s central bank.

The report marks the latest effort by Beijing to intensity the clampdown on cryptocurrency activities because of concerns about financial instability.

But the bigger story is, as CoinTelegraph’s Marie Huillet reports, the U.S. Securities and Exchange Commission (SEC) has rejected a total of nine applications to list and trade various Bitcoin (BTC) exchange-traded funds (ETFs) from three different applicants, according to a three separate orders published by the SEC today, August 22.

image courtesy of CoinTelegraph

The disapprovals come one day ahead of the anticipated deadline, August 23, stipulated for a pair of BTC ETFs that had been submitted by ProShares in conjunction with the New York Stock Exchange (NYSE) ETF exchange NYSE Arca.

The SEC has now rejected a further seven proposed ETFs alongside the ProShares pair –– these being five further proposed ETFs from Direxion, also for listing on NYSE Arca –– and two proposals from GraniteShares, for listing on CBOE.

For all three disapprovals, the SEC has stated that:

“[T]he Commission is disapproving this proposed rule change because, as discussed below, the Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”

The SEC has today reinforced its qualms over inadequate “resistance to price manipulation” in an insufficiently sized BTC derivatives market. In the case of ProShares’ two ETFs –– and repeated in the two other disapproval orders –– the SEC has stated that:

“Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.’ That failure is critical because, as explained below, the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary.”

As a March 2018 registration statement from the SEC noted, “the [ProShares] Funds do not intend to hold Bitcoin Futures Contracts through expiration, but instead intend to either close or ‘roll’ their respective positions.” This had been specifically designated as a potential risk for the two ETFs in question –– in addition to the “extreme volatility and low liquidity” attributed to both Bitcoin spot and derivatives markets.

In today’s three orders, the SEC has however notably stated that:

“[The agency] emphasizes that its disapproval does not rest on an evaluation of whether bitcoin, or blockchain technology more generally, has utility or value as an innovation or an investment.”

The SEC’s fresh disapprovals echo the concerns the agency had already articulated in its initial rejection of a high-profile Bitcoin ETF application from the Winklevoss twins in March 2017:

”When the spot market is unregulated –– there must be significant, regulated derivatives markets related to the underlying asset with which the Exchange can enter into a surveillance-sharing agreement.”

This July the SEC rejected the Winklevoss’ petition following their initial application’s denial, in which the twins claim that crypto markets are “uniquely resistant to manipulation.” In their rejection of the petition, the agency said that “the record before the Commission does not support such a conclusion.”

At the beginning of August, the SEC delayed its decision over yet another Bitcoin ETF application –– this time filed by by investment firm VanEck and financial services company SolidX, for trading on CBOE. Notably, instead of proposing a Bitcoin futures-based fund, the application proposed a physically-backed model, which will raise the further question of custody.

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The US president is starting to sound uncharacteristically defensive in the aftermath of the Manafort and Cohen turmoil.

Overnight, at 1am, a sleepless President Trump blasted out one of his signature tweets: “NO COLLUSION – RIGGED WITCH HUNT!” Blame it on the ambien?

NO COLLUSION – RIGGED WITCH HUNT!

— Donald J. Trump (@realDonaldTrump) August 23, 2018

But in a more tangible threat – one which some said is a classic from an Arab dictator playbook – President Trump said that if he ever got impeached, the stock market would crash and “everybody would be very poor.”

In an interview with Fox and Friends’ Ainsley Earhardt that aired on Thursday, Trump was asked if he thought Democrats would move to file articles of impeachment should they take over control of the House and Senate come November. The president argued that he’s done a great job in office, despite the critical coverage in connection with the Cohen case and other controversies.

“If I ever got impeached, I think the market would crash, I think everybody would be very poor. Because without this thinking [points to head] you would see, you would see numbers that you wouldn’t believe in reverse.”

@realDonaldTrump to Ainsley Earhardt “I don’t know how you Impeach somebody that’s done a great job. I tell you what if I ever got Impeached markets would Crash. I think everybody woild be very poor, b/c w/o this thinking(points to his head)#ThursdayThoughts #MorningJoe pic.twitter.com/4YdgP09dbS

— Kikkay (@NikkisBubble) August 23, 2018

Quoted by CBS, the president cited record unemployment numbers, saying if his 2016 opponent Hillary Clinton were elected instead, the country would not be in the position it is in today.

“I freed up, I got rid of regulations, the tax cut was a tremendous thing,” Trump said. “But even before the tax cut, right from the first day, I got rid of regulations. I approved the pipelines, 48,000 jobs. But I did a lot of things. Had Hillary and the Democrats gotten in, had she been president, you would have had negative growth. We picked up $10 trillion worth.”

Trump has long-touted his administration’s ability to deliver on “amazing” economic growth figures, this time crediting much of the country’s success to the GOP tax cut plan, “fairer” trade deals and cutting government regulation.

The stock market has had little reaction so far to Trump’s renewed legal troubles this week with two former advisors now guilty of criminal acts and one implicating him directly. The Dow fell slightly on Wednesday and stock futures were little changed Thursday morning. Traders say the market right now expects Trump to avoid impeachment unless the special counsel investigation can tie the president directly to collusion with Russia to sway the 2016 election

The S&P 500 is up 7 percent for the year and on Wednesday its run since March 2009 became the longest bull market on record.

“I don’t know how you can impeach somebody who’s done a great job,” Trump said.

In the same interview, Trump suggested it should be illegal for people facing prosecution to co-operate with the government for a reduced sentence and he didn’t rule out pardoning his former campaign chief and newly convicted felon Paul Manafort.

As we reported previously, Trump also discussed Cohen’s “hush payments”, saying that that “later on” he knew that former attorney Michael Cohen made hush-money payments to adult-film star Stormy Daniels and Playboy model Karen McDougal, and insisted the money did not come from campaign funds. “Later on I knew. Later on. What he did — and they weren’t taken out of the campaign finance, that’s the big thing. That’s a much bigger thing […] Did they come out of the campaign? They didn’t come out of the campaign, they came from me.”

Questions surrounding impeachment, however, have once again been raised on Capitol Hill in light of guilty verdicts leveled against two former Trump associates – former Trump campaign chairman Paul Manafort and former Trump attorney Michael Cohen.  

Top Democrats including House Minority Leader Nancy Pelosi and Sen. Dick Durbin, say that the discussions of impeachment are “premature” and “not a priority” for the caucus. But a top GOP aide told CBS News’ Nancy Cordes that “this is the most uncomfortable Republicans have been” about the president’s actions.

 

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A juror who sat on former Trump campaign chairman Paul Manafort’s case said on Fox News Wednesday night that a lone juror prevented a ruling on all 18 counts against Manafort. Juror Paula Duncan said a lone juror could not come to a guilty verdict on 10 charges, forcing judge T.S. Ellis III to declare a mistrial on 10 of Manafort’s 18 counts.

“It was one person who kept the verdict from being guilty on all 18 counts,” Duncan, 52, said. She added that Mueller’s team of prosecutors often seemed bored, apparently catnapping during parts of the trial.

“There was one holdout.”

In an exclusive interview on @foxnewsnight, Paul Manafort juror Paula Duncan said Special Counsel Robert Mueller’s team was one holdout juror away from convicting Paul Manafort on all 18 counts of bank and tax fraud. https://t.co/IPeZ46buVL pic.twitter.com/vNMFMBUuiz

— Fox News (@FoxNews) August 23, 2018

While the identities of the jurors have been closely held, kept under seal by Judge T.S. Ellis III at Tuesday’s conclusion of the high-profile trial, Duncan gave a behind-the-scenes account to Fox News on Wednesday, after the jury returned a guilty verdict against the former Trump campaign chairman on eight financial crime counts and deadlocked on 10 others.

Duncan described herself as an avid supporter of President Trump, but said she was moved by four full boxes of exhibits provided by Mueller’s team – though she was skeptical about prosecutors’ motives in the financial crimes case.

“Certainly Mr. Manafort got caught breaking the law, but he wouldn’t have gotten caught if they weren’t after President Trump,” Duncan said of the special counsel’s case, which she separately described as a “witch hunt to try to find Russian collusion,” borrowing a phrase Trump has used in tweets more than 100 times.

Though Duncan said the jury was not political in its conviction, she said she was skeptical of prosecutors’ intentions, which she implied were political.

Paul Manafort juror Paula Duncan: “Based on what I saw, what I heard, I think I would’ve liked to have heard a little more from the defense.” @foxnewsnight https://t.co/IPeZ46buVL pic.twitter.com/9xUdUjd8Tb

— Fox News (@FoxNews) August 23, 2018

Duncan said jurors never explicitly deliberated on Manafort’s ties to Trump: “Certainly Mr. Manafort got caught breaking the law, but he wouldn’t have gotten caught if they weren’t after President Trump,” Duncan said, referencing Mueller’s probe, which she described as a “witch hunt to try to find Russian collusion.” The president frequently derides Mueller’s investigation as a “witch hunt.”

“Something that went through my mind is, this should have been a tax audit,” Duncan said, sympathizing with the foundation of the Manafort defense team’s argument.

Paul Manafort juror Paula Duncan: “I thought that the public, America, needed to know how close this was and the evidence was overwhelming.” @foxnewsnight https://t.co/IPeZ46buVL pic.twitter.com/JSm7Qtdxd8

— Fox News (@FoxNews) August 23, 2018

Duncan described a tense and emotional four days of deliberations, which ultimately left one juror holding out. Behind closed doors, tempers flared at times: “It was a very emotionally charged jury room – there were some tears,” Duncan said about deliberations with a group of Virginians she didn’t feel included many “fellow Republicans.”

While her political allegiance to the president raised conflicted feelings in Duncan, she said it ultimately didn’t change her decision about the former Trump campaign chairman.

“Finding Mr. Manafort guilty was hard for me. I wanted him to be innocent, I really wanted him to be innocent, but he wasn’t,” Duncan said. “That’s the part of a juror, you have to have due diligence and deliberate and look at the evidence and come up with an informed and intelligent decision, which I did.”

Paul Manafort juror Paula Duncan: “I did not want Paul Manafort to be guilty, but he was and no one’s above the law. @foxnewsnight https://t.co/IPeZ46buVL pic.twitter.com/xPSHB8HOqN

— Fox News (@FoxNews) August 23, 2018

Duncan, a Missouri native and mother of two, showed Fox News her two notebooks with her juror number #0302 on the covers. 

In the interview, Duncan also described how the special counsel’s prosecutors apparently had a hard time keeping their eyes open.

“A lot of times they looked bored, and other times they catnapped – at least two of them did,” Duncan said. “They seemed very relaxed, feet up on the table bars and they showed a little bit of almost disinterest to me, at times.”

The jury box was situated in a corner of the courtroom that gave them an unobstructed head-on view of the prosecutors and defense, while members of the media and the public viewed both parties from behind.

Judge Ellis told jurors, including Duncan, that their names would remain sealed after the trial’s conclusion, because of dangerous threats he received during the proceedings. But the verdict gave Duncan a license to share her story without fear. “Had the verdict gone any other way, I might have been,” Duncan said.

She remains a Trump supporter.  “Every day when I drove, I had my Make America Great Again hat in the backseat,” said Duncan, who said she plans to vote for Trump again in 2020. “Just as a reminder.”

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One day after the the S&P500 bull market set a new duration record, at exactly 0.01 Washington Time on Thursday, the U.S. imposed tariffs of 25% on $16 billion worth of imports from China. At the same time, China said it opposes the latest U.S. tariffs and will retaliate tit-for-tat; and would also complain to the WTO. China targeted items include coal, medical instruments, cars and buses. Meanwhile, low-level trade talks held Wednesday are scheduled to continue Thursday with very modest hopes of resolving the trade tensions.

The renewed trade escalation, coupled with upbeat FOMC minutes which guaranteed a September rate hike (while warning on growing trade tensions), sent the dollar higher against all its G10 peers for the first day in six as investors awaited a meeting of global central bankers after the Federal Reserve signaled no change to its pace of monetary policy tightening.

UBS Wealth Management deputy UK CIO Caroline Simmons cited trade concerns as the reason for paring back an overweight on global equities to a very small position. “We’ve got trade conflicts, and sanctions, in Turkey and Russia, so there are a few things going on that we were a little nervous about,” Simmons said.

World stocks came under pressure on Thursday as new tariffs took effect in the U.S./China trade war and markets speculated about U.S. President Donald Trump’s position following legal rulings against two former advisers. US equity futures were flat and US Treasuries were generally unchanged as European stocks gained and Asian shares fell. The MSCI world equity index was 0.1% lower in early trading, while a rise across defensive sectors helped Europe’s Stoxx Europe 600 Index eek out modest gains while futures for the S&P 500 Index were little changed as investors continued to weigh Trump’s legal woes.

Cohen’s plea deal does not mean the president has been implicated in anything, press secretary Sarah Sanders said at a White House briefing, but the market was not convinced: “While the (legal issues) shouldn’t substantially alter the stock market landscape, money managers and analysts say the developments raise the likelihood of further turbulence ahead for Mr. Trump heading into the mid-term elections,” said James McGlew, Perth-based analyst at stockbroking firm Argonaut.

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2%. Hong Kong’s Hang Seng index stumbled 0.5 percent while Korean and Chinese stocks gained. The Chinese currency resumed its slump, with the offshore yuan falling to 6.88 around 6am EDT.

Central banks will again be in the spotlight as investors await comments from Fed chairman Jerome Powell later this week when he speaks at the meeting of policy makers in Jackson Hole, Wyoming. Familiar tensions remain in the background, however. Alongside Trump’s legal woes, traders must also digest the imposition of fresh tariffs between the U.S. and China in the midst of talks aimed at averting the worsening trade conflict.

“With economic data mostly cooperating with the Fed’s base message of continued rate increases driven by tight labor markets, above trend growth and bubbling inflation, it is unlikely that Powell will drastically stray from this message,” BNY Mellon strategists said in a note, adding that Powell may provide more details on the neutral rate, curve inversion and balance sheet process.

In currency markets, the euro briefly pared some losses after manufacturing and services data showed the region’s economy is still strong, but soon retraced the move. According to Markit, the Flash Eurozone PMI Composite Output Index rose modestly in August to 54.4 (from 54.3 in July) a 2-month high, however optimism about the future hit a two-year low among trade war uncertainty.

Flash Eurozone #PMI Composite Output Index at 54.4 in August (54.3 in July) 2-month high; Optimism hits two-year low https://t.co/YEtSOSMPVu pic.twitter.com/aC6l5fJoVo

— IHS Markit PMI™ (@IHSMarkitPMI) August 23, 2018

Commenting on the recent euro moves, Aviva Investors said that the common currency’s selloff now looks overdone, and the euro may recover on the prospect of stronger growth and reduced political risks in the region.

Elsewhere in FX, among the biggest currency losers were the South Africa’s rand, which slumped after a tweet from U.S. President Donald Trump fueled speculation of possible sanctions against the country…

… and the Australian dollar, which is under pressure as Prime Minister Malcolm Turnbull fights to keep his leadership. Australian shares also slipped 0.3% after several senior ministers tendered their resignations on Thursday and demanded a second vote on Prime Minister Malcolm Turnbull’s leadership. “The Aussie will weaken against the U.S. dollar and the pound because investors are underpricing rising domestic political risks as PM Turnbull’s challenger gains support”, Morgan Stanley analysts including Hans Redeker write in a note.

The Russian ruble initially gapped weaker after yesterday’s warning of outflows from Russian Economy Minister, before snapping higher after the Russian Central Bank canceled FX buying until end-Sept to “reduce volatility in financial markets.”

In rates, the US Treasury curve flattens led by the belly, while bunds edged lower after French and German PMI prints; interesting options activity observed by Bloomberg included a large buyer of deep OTM calls in OATs and BTPs.

Commodities were under pressure due to the rebound in the dollar, with gold also slumping on the outlook for higher American interest rates. Oil edged lower after surging on a U.S. government report that showed the biggest decline in crude inventories since late July.

Expected data today include jobless claims, PMIs, and home sales. Alibaba, Hormel, Autodesk, Gap, Intuit, and VMware are among companies reporting earnings.

Market Snapshot

• S&P 500 futures little changed at 2,861.75
• STOXX Europe 600 up 0.2% to 384.69
• MXAP down 0.3% to 163.60
• MXAPJ down 0.2% to 530.59
• Nikkei up 0.2% to 22,410.82
• Topix down 0.01% to 1,698.22
• Hang Seng Index down 0.5% to 27,790.46
• Shanghai Composite up 0.4% to 2,724.63
• Sensex up 0.1% to 38,328.35
• Australia S&P/ASX 200 down 0.3% to 6,244.37
• Kospi up 0.4% to 2,282.60
• German 10Y yield unchanged at 0.344%
• Euro down 0.4% to $1.1554
• Italian 10Y yield rose 7.2 bps to 2.789%
• Spanish 10Y yield fell 1.8 bps to 1.363%
• Brent futures down 0.5% to $74.41/bbl
• Gold spot down 0.7% to $1,187.34
• U.S. Dollar Index up 0.3% to 95.42

Top Overnight News from Bloomberg

• U.S. central bankers are ready to raise interest rates again so long as the economy stays healthy, according to a record of the Federal Reserve’s most recent policy meeting
• Australia’s Prime Minister Malcolm Turnbull said he would only step aside if his rivals gather enough signatures to show he no longer has control of the party. Turnbull declined to comment when asked who he would support if Dutton manages to force a leadership vote. Treasurer Scott Morrison — a Turnbull ally — is preparing to contest the ballot, Sky News reported
• U.S. tariffs of 25% on $16 billion worth of imports from China come into effect at 00:01 Washington time, according to a statement in the Federal Register. China opposes the latest U.S. tariffs and is forced to retaliate, commerce ministry says in a statement. Mid-level trade talks held Wednesday are scheduled to continue Thursday
• President Donald Trump denied using campaign funds as hush money for women who alleged past affairs with him, a day after federal prosecutors claimed some campaign officials were aware of the payments
• President Donald Trump’s plans to punish carmakers who produce vehicles outside the U.S. and sell them to Americans are hindering his administration’s efforts to close the deal on a new Nafta this month
• The U.K. government will publish the first in a series of no-deal Brexit notices on Thursday, advising business and consumers on how to cope should U.K. leaves the EU without an agreement. A second batch will be published in September. Most of the British public believes the U.K. will leave the European Union without a deal, with many planning to cut costs on everything from clothes to home extensions, a survey finds
• Michael Cohen’s mea culpa was notable partly because he fingered a host of executives and companies who he says also participated in the scheme. That signals that there’s a roster of people who could emerge as potential witnesses or targets in any ongoing investigation into campaign finance violations; Cohen’s payments are not illegal, Trump’s lawyer Rudy Giuliani says in a tweet
• ECB Governing Council member Jens Weidmann says in Berlin that it’s “time to begin exiting the very expansionary monetary policy and the non-standard measures, especially considering their possible side effects”
• Goldman Sachs Group Inc. is shutting two hedge funds run by people based in Asia, according to people with knowledge of the matter
• Foreign buyers led by Hong Kong billionaires and Korean securities firms spent more on the U.K. capital’s offices in the first half than in central Paris, Manhattan, Munich and Frankfurt combined. The weak pound is making London a bargain compared with cities in Europe, many of which have undergone their own property booms

Asia-Pac stock markets traded subdued with the region cautious amid political turmoil in Australia and as the 2nd round of Trump tariffs on China took effect. ASX 200 (-0.3%) was negative as a mega-storm brewed on the political front with PM Turnbull’s future in office highly doubtful after 3 cabinet members resigned including Finance Minister Cormann who advised the PM he no longer has party support, although losses in the index have been stemmed as participants reacted to a slew of earnings and with miners underpinned by recent strength in commodities. Elsewhere, Nikkei 225 (+0.2%) remained afloat on the back of a weaker JPY, while Shanghai Comp. (-0.3%) and Hang Seng (-0.8%) were jittery as the 2nd round of US tariffs on China took effect today and after the PBoC refrained from liquidity operations again. Finally, 10yr JGBs were relatively unchanged with only minimal gains seen from the cautious risk tone in the region and with demand also subdued amid weaker results at the enhanced liquidity auction for longer-dated bonds.

Top Asian News

• Xiaomi’s Rally Fizzles as Ebbing Margins Outweigh Solid Growth
• San Miguel Seeks $2.67 Billion in Sale of Food-Unit Shares
• Japan’s Auto Stocks Drop Before Next Round of U.S.-China Tariffs
• Indonesia Wants Foreigners to Own Less of Its Bonds in Long Run
• Women, Notably Non-Moms, Need Not Apply in Hong Kong: Job Study

European equities are largely mixed and trading without direction amidst the fresh US-China tariff action. The IT sector is mimicking the outperformance seen on Wall Street and is currently the leading sector. Ryanair (+6.6%) is currently leading the gains in the Stoxx 600 (alongside Sunrise amid an upgrade in EBITDA guidance) as the co. reached an agreement with the Irish pilots union after 22 hours of deliberation. Individual equity losses in Europe are driven by the general weakness in the EM scope, which is weighing on companies with exposure to the affected countries, such as Deutsche Bank (-2.3%) and Raiffeisen Bank (-3.05%), while Continental (-2.7%) fails to recover from yesterday’s losses.

Top European News

• Euro-Area Growth Stays Strong as ECB Plans to Ease Stimulus
• Ryanair Reaches Deal With Irish Pilots, Sending Stock Higher
• U.K.’s Raab Wants Business as Usual After a ‘No Deal’ Brexit
• Brexit-Bound London Beats Global Rivals to Real Estate Cash

In FX, FOMC minutes have given the flagging DXY a fillip, along with indirect props from rival currencies that are succumbing to more selling pressure due to specific/independent bearish factors. Thus, the index and Dollar overall have rebounded, with the former reclaiming 95.000+ status and almost up to 95.500 again. AUD – No respite for the Aud that is back on the rack after a fleeting rebound to around 0.7350 vs its US counterpart and sub-0.7300 on the latest political machinations down under. Indeed, the Aud is also extending losses relative to the NZD, with the cross down towards 1.0900 even though the Kiwi is back below 0.6700 vs the USD. EM – The usual suspects are being flogged again, but with the Rub and Zar really seeing the brunt of investor angst on US sanctions – Rouble and Rand both around 1% or more weaker vs the Greenback. Elsewhere, Usd/Cnh firmer after reports of Chinese banks selling Yuan vs Dollars on a forward basis and an uptick in the Cny fix after some retracement of late from the PBoC.

Commodities are pressured amid the recent dollar strength after the FOMC minutes cemented rate hike expectations. WTI and Brent Oct’ 18 futures trade lower by 0.2% and 0.4% respectively after the US benchmark rose over 3% yesterday. News flow has been light for the complex thus far, however, it is worth noting the ongoing trade disputes may potentially dampen global demand. Meanwhile, sources initially reported the Saudi Aramco IPO listing has been halted, but Saudi Energy Minister later denied these reports. Elsewhere, precious and base metals also feel the effect of the aforementioned dollar strength with gold below USD 1190/oz.

Looking at the day ahead, we’ll get the latest set of PMI data in the US, as well as the June FHFA house price index, 2Q house price purchase index, July new home sales and August Kansas City Fed manufacturing activity index. Away from data, Intuit, HP and Alibaba will reports their earnings.

US Event Calendar

• 8:30am: Initial Jobless Claims, est. 215,000, prior 212,000; Continuing Claims, est. 1.73m, prior 1.72m
• 9am: FHFA House Price Index MoM, est. 0.3%, prior 0.2%; House Price Purchase Index QoQ, prior 1.7%
• 9:45am: Bloomberg Consumer Comfort, prior 58.9
• 9:45am: Markit US Manufacturing PMI, est. 55, prior 55.3;
  • Markit US Services PMI, est. 55.8, prior 56
  • Markit US Composite PMI, prior 55.7
• 10am: New Home Sales, est. 645,000, prior 631,000; New Home Sales MoM, est. 2.22%, prior -5.3%
• 11am: Kansas City Fed Manf. Activity, est. 22.5, prior 23
• 8pm: Fed Hosts Annual Jackson Hole Central Banking Symposium

DB’s Jim Reid concludes the overnight wrap

The interesting thing about markets over the last 24 hours is that, despite all the furore surrounding the legal dramas in Washington – with markets and news outlets across the board now speculating about how close this gets to the Presidency – markets and especially risk assets have shrugged their collective shoulders for now. Plenty of discussion but no conviction yet as to what this means. Indeed it’s not clear whether further legal problems for the administration would distract from or increase focus on fighting a trade war.

Indeed an early -0.24% intraday decline was as bad as it got for the S&P 500 yesterday, and the index retraced its losses to close only -0.04% lower by the end of play with even the Fed minutes barely creating much impact. The Dow  and Nasdaq finished -0.34% and +0.38% while in Europe, markets were largely flat to slightly higher. The VIX also fell back into the low 12s, closing at 12.25 (-0.61 on the day) while 10y Treasury yields finished 1.1bps lower and traded in  a fairly unexciting 2.9bps range throughout the day. The USD was a bit more volatile but to be fair this is all relative. The Dollar index ended -0.12% – the sixth decline in a row – but with a range (-0.47%) which was still well below the average YTD (0.60%).

Commodity markets rallied, with Brent crude oil advancing +3.07% yesterday and the energy sector leading the S&P 500 with a +1.20% gain – its strongest move in over a month. Oil prices have been boosted by the dollar’s recent softness, with the DXY index down 1.70% over the last two weeks, but also by supportive data from the US yesterday. US crude inventories fell by 5.8 million barrels last week, almost completely retracing the previous week’s surprise inventory build.

Back to markets and despite the political headwinds, with the US economy still firing on all cylinders and earnings season breaking records, it’s clear that US markets are choosing to focus more on the strong fundamentals rather than the political and macro risks. Target and Lowes announced better-than-expected results yesterday, boosting the S&P 500 retail subsector to a fresh all-time high. Over 81% of companies have beaten earnings estimates this season, which is  the highest percentage based on data we have back to 1998. So an impressive season and a theme that keeps on rising to the surface above the more negative noise elsewhere.

Staying with the US, the FOMC minutes last night broadly met expectations. They did not move markets and supported the existing policy path of raising rates steadily. The discussion of the economic outlook was slightly more balanced than previously, as downside risks from trade, housing, and emerging markets have intensified somewhat. FOMC members seem to broadly agree that another interest rate hike will be warranted soon paving the way for a September hike (Bloomberg implied odds at 92%). The committee debated some other potentially relevant topics – e.g. the yield curve, balance sheet policy, the counter-cyclical buffer, and slow wage growth – but the minutes did not reveal any consensus conclusions. These topics are nevertheless likely to resurface later this year.

Yesterday’s economic calendar was light, but the US data may have underlined the FOMC’s concern around the housing sector’s outlook. Existing home sales declined to 5.34 million in July, its slowest pace since February 2016. Mortgage applications rose a robust 4.2%, but our US economists continue to expect the housing sector to weigh slightly on growth over the next few quarters. In Europe, markets traded sideways amid very low liquidity. Benchmark indexes in Germany, France, and the UK experienced trading volumes 21.7%, 19.2%, and 22.2% lower than the 100-day average, respectively. Italy saw even thinner activity, with volumes 36.1% lower than average, and was the only major Eurozone country to post a selloff (-0.40%) yesterday. Italian 10-year bond yields rose 7.4 bps, underperforming Germany and the rest of peripheral Europe.

In Asia this morning, sentiment is a bit mixed with the Nikkei up +0.17% as the Yen weakens, while the Kospi (-0.04%), Hang Seng (-0.72%) and Shanghai Comp. (-0.34%) are down as we type. Meanwhile the US dollar index has nudged up for the first time in seven days (+0.3%) with gains against most currencies while futures on the S&P are pointing to a softer start.

It’s hard to see politics dissipating from our screens today with the US and China now imposing the latest tit-for-tat protectionist measures, specifically tariffs of 25% on $16bn of imports from both sides. Meetings between the two sides seemingly failed to yield tangible improvements yesterday, but remember that discussions are still ongoing about potential tariffs by the US on as much as $200bn of Chinese imports from as soon as September 6th. Meanwhile the  latest on NAFTA appears that the US and Mexico are close to a deal, with the Mexican Chief negotiator Mr Seade indicating that “we might close this, not in a matter of hours, but these days. We still have next week”. Elsewhere the US Commerce Secretary Ross also said “…I think a deal is very likely within reach in the very, very near future”.

Today we’ve also got some important economic data with the global flash August PMIs due out. Early this morning we already received Japan’s manufacturing reading which edged up 0.2pt from last month to 52.5. Over the next couple of hours we’ll get manufacturing, services and composite prints in core Europe and then the same for the US this  afternoon. In Europe the consensus is for a small 0.2pt rise in the composite to 54.5 led by both the manufacturing and services sectors. In the US the market is however expecting a modest 0.3pt decline in the manufacturing print (to 55.0) and 0.2pt fall for the services print to 55.8.

Away from the PMIs and looking at the day ahead. In Europe, we will get the latest ECB monetary policy minutes, August business and manufacturing confidence and production outlook for France along with the survey of industrial investment for France and advance August consumer confidence for the euro area. In the US, we get the June FHFA house price index, 2Q house price purchase index, July new home sales and August Kansas City Fed manufacturing  activity index. Away from data, Intuit, HP and Alibaba will reports their earnings.

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